Warning over ‘double dip’ recession

One in four businesses fear they will face insolvency if the economy suffers a “double dip”, according to new research.

A study published today by the trade body for insolvency practitioners, R3, concluded that businesses are wary of faltering despite the economy’s fragile recovery.

R3 found that the hotel and catering sector was the least positive about its survival with almost half of those surveyed in the sector (49pc) saying that a double dip could result in their company becoming insolvent.

Manufacturing companies surveyed gave the most bullish verdict, with less than a fifth (19pc) saying they were concerned about survival if the economy dipped again into recession.

R3’s eastern region council member Chris Williams, a partner at McTear, Williams & Wood, said: “These figures confirm what insolvency practitioners have seen in previous recessions; the early stages of recovery are a difficult time for businesses.

“Many struggling businesses have drawn heavily on their reserves in order to survive and their resources have now begun to run out. When an economy emerges from a recession, creditors’ behaviour changes as they believe they stand to achieve greater returns than they would have done during the downturn.

“It is easy to forget that banks are not a company’s only creditors, for many their largest creditor is the Government. With close to 300,000 firms in crucial ‘time to pay’ tax arrangements with Her Majesty’s Revenue and Customs, it seems that a large number of businesses are in need of a financial health check.”

Mr Williams added: “It is unsurprising that the hospitality services industry feels that it will fare worst if there is another dip. “Although we are technically out of a recession, many people are still financially cautious and are not splashing out on hotels and lunches. Post recession, the manufacturing sector tends to be the first to recover as people slowly start to demand more goods.

“The journey back to recovery is slow and uncertain and we advise any business owner who believes their company may be on the path to insolvency to seek help sooner rather than later.”

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